Brexit signals that a new policy paradigm is required including re-nationalisation

With the new British Prime Minister now indicating that she will push ahead with Brexit and free the nation from the undemocratic imposts of the increasingly dysfunctional European Union, a view that is apparently ‘poisonous’ to some so-called progressive writers, several pro-Remain economists or economic commentators have realised that the game is up for neo-liberalism in Britain. There have been several articles recently arguing (after bitching about the loss of the Remain vote and repeating the catastrophe mantra) that a new economic paradigm is now called for in Britain, based on its new found sovereignty (after it finally exits). It could, by the way, exit through an Act of Parliament without all the Article 50 palaver if it wanted to. That is just a smokescreen. This idea of a new paradigm being required is exactly what Thomas Fazi and I are working on as part of our current book project which is nearing completion. Today, I consider briefly our view that nationalisation has to return as a key industry policy plank for any aspiring progressive political party.

David Blanchflower, who resigned in a fit of pique from Jeremy Corbyn’s Economic Advisory Committee, wrote in the UK Guardian (July 5, 2016) that – The Brexit vote will kill austerity. I couldn’t agree more.

Blanchflower dumped on Corbyn when he resigned claiming that if Corbyn remained as leader then (his words in quotations, the rest from FT article):

“nobody in their right mind” would serve as governor of the Bank of England, an ambassador, or a member of the Bank’s Monetary Policy Committee.

Really. Well perhaps only those of right mind and approach will now come forward to advise Corbyn on how to follow a truly progressive agenda rather than beat around the neo-liberal bush and worry about fiscal rules etc.

Other Corbyn advisors spat the dummy after the Brexit result was known claiming they were “‘unhappy’ with Corbyn’s role in the EU campaign” and had withdrawn from the Advisory Committee, presumably while the self-serving Blairites got rid of Corbyn and reimposed neo-liberal sanity. Pitiful really.

The only thing the Blairites have done is to empower the Labour Party membership to re-endorse Corbyn and to then turn their attention on de-selecting each and every one of the MPs who have tried to get rid of him, dishonestly using the Brexit issue as a pretext, and thereby ruining their political careers. Could not happen to a better lot!

Then the EAC advisors can resume their positions helping these de-selected MPs form a new party – sort of like the Liberal Democrats or some other wishy washy outfit.

In the Guardian article, Blanchflower rehearsed all the doom and gloom that the Remain campaign tried to pull on the people – no NHS funding, “big house price drop”, “pound has collapsed” (what actually constitutes a collapse?), credit rating downgrades (yep, that always slips in), “negative growth”, Britain will have an “awful state of the public finances” (what the deficit might rise a bit!) and more.

In sum, “believe me they are going to be bad”.

Next stop, is that there will be a “major shock not only to the UK but also to global output”. World recession looming from Brexit. Whew!

We read elsewhere that “Boeing has announced plans to establish a new £100m servicing facility in the UK and double its workforce in the country over the next few years” (Source).

We learned that:

The plane-maker, together with the government and other industry players will also help fund some £365m worth of aerospace R&D projects that have been approved by the government as part of the Aerospace Growth Partnership.

Aah the power of the currency to boost aggregate spending and create a high productivity, employment rich future for Britain, without the encumberances of that lot in Brussels.

What Blanchflower did get right though was that:

When a negative shock comes John Maynard Keynes taught us that fiscal and monetary policy has to work together to provide stimulus. That worked incredibly successfully in 2009 as governments threw the economic kitchen sink at the recession. Growth spurted only to be slowed by austerity in 2010. The same is needed this time. All hands to the pumps. Austerity is dead. At last.

And more companies like Boeing will seize the initiative and start investing and developing a broader and more skilled labour base.

The neoliberal agenda of the last four decades may have been good for the top 1%, but not for the rest.

He, at least, can see that the Brexit decision, which has been blamed on racist and stupid voters, is a flow-on from years of neglect of the basic interests of workers by governments intent on “tilting the political balance towards capital”

He understands that:

… any increase in corporations’ market power is de facto a lowering of real wages – an increase in the inequality that has become a hallmark of most advanced countries today.

He also notes that “Free migration within Europe … [leads to] … depressed wages and higher unemployment, while employers benefit from cheaper labor.”

Combined with “cutbacks in public services” brought on by the relentless austerity mentality of neo-liberal infested governments and we have “the evisceration of the middle class” dened the “benefits of economic growth” while it watch “billions going to save the banks” and the excessive salaries of the banksters.

So after the Brexit vote, Joseph Stiglitz is clear “more neoliberal ideology won’t help … there are alternatives to the current neoliberal arrangements …”

His thesis is similar to the previously noted interventions. He is annoyed about the Brexit vote and predicts doom and gloom.

He correctly notes that Britain has “been running a current account deficit of 7% – a historic high” which relies on foreigners desiring to accumulate financial assets denominated in the pound for its continuation. That is, the trade gap has to be financed through the capital account.

And clearly, if the foreigners reduce their desire to accumulate sterling-denominated financial assets then Britain will have to adjust to a deteriorating real terms of trade and that will be painful for a time.

So if policy shifts within the UK do not entice on-going foreign capital then times will be tough for a while in Britain.

In that context, he is correct in his assessment that what Britain “has to do flies in the face of 30 years of centre-right policy” – that is, the neo-liberal austerity mindset is no guide for what the British government has to do now to revitalise its flagging economy, which now has the additional issue of Brexit uncertainty to deal with.

Paul Mason says that Britain has to “redesign the economy so it produces wealth in a different way” which will involve a combination of tax policy to provide investment incentives, use the currency to build new infrastructure to “to create capacity to grow long-term” and upskill “the workforce, replacing low-wage jobs with machines”.

In other words a “national-centric industrial policy” that was common in the pre neo-liberal era and helped economies around the world achieve much stronger growth rates and wage equity than has been the norm in the ‘free market’ period.

He says the questions that now need to be asked by Britain’s political leaders are:

Competitiveness now is about: what hikes real wages? What boosts investment? What raises productivity? What expands the export sector? These questions all raise another one: who is going to do it?

But it will not be all ‘export-led’ growth mantra that will help Britain adjust. The ‘March of the Makers’ was George Osborne’s mantra – Please read my blog – The March of the Makers – out! – for more discussion on this point.

Britain has a large internal market, a strong manufacturing tradition (to be revived) and a well-educated workforce. Industry policy including nationalisation has to form part of the new domestic focus for the nation.

The upshot is that the geniuses in the European Commission and the Council have considered these two countries, which are deeply scarred by the austerity imposed upon them by the Stability and Growth Pact (SGP) rules, with entrenched and ridiculously high levels of unemployment and urban and regional decay the result, have to impose even more austerity.

The Council has ratified the Commission’s recommendations under the destructive Excessive deficit procedure, the corrective arm of the SGP, that the governments of Portugal and Spain are not doing enough to ruin the well-being of their nations and so have voted to “trigger sanctions” under the procedure.

The idiots in the Commission will now have some meetings, with plenty of good food and wine presumably on offer to help them with their work, to decide the scale of the “fines” that will be imposed on Spain and Portugal.

The infinitely stupid Slovakian finance minister was quoted as saying “I am sure that we will have a smart, intelligent result at the end”.

What fining these nations for trying to bring some growth to their economies? Or backing down – again – and not fining them and looking even more dysfunctional than before?

Intelligent either way, n’est-ce pas? F*ck, you could not write a story line that was this ridiculous.

Recall that the Commission or Council turned a blind eye last year on Spain’s deficit increases because they knew that they would help the nation grow and would ease the way for the People’s Party to win the December 2015 national election.

The economy did grow as a result of the deficit increases (which, in part, were the result of discretionary stimulus measures adopted by the national and regional governments) but PP didn’t win the election.

Now after a re-run of the election on June 29, 2016 the Commission had determined that they will pillary the nation.

So Brexiters – this is the corrupt, dysfunctional and morally bankrupt club you have voted in your wisdom to leave. A good move.

The Committee is seriously concerned about the disproportionate adverse impact that austerity measures, introduced since 2010, are having on the enjoyment of economic, social and cultural rights by disadvantaged and marginalized individuals and groups. The Committee is concerned that the State party has not undertaken a comprehensive assessment of the cumulative impact of such measures on the realization of economic, social and cultural rights, in a way that is recognized by civil society and national independent monitoring mechanisms (art. 2, para. 1).

…

The Committee reminds the State party of its obligations under the Covenant to use the maximum of its available resources, with a view to progressively achieving the full realization of economic, social and cultural rights. The Committee draws the State party’s attention to the recommendations contained in its open letter of 16 May 2012 to States parties on economic, social and cultural rights in the context of the economic and financial crisis, with regard to the criteria for austerity measures. Such measures must be temporary, necessary, proportionate, and not discriminatory and must not disproportionately affect the rights of disadvantaged and marginalized individuals and groups and respect the core content of rights. In that context, the Committee recommends that the State party review its policies and programmes introduced since 2010 and conduct a comprehensive assessment of the cumulative impact of these measures on the enjoyment of economic, social and cultural rights by disadvantaged and marginalized individuals and groups, in particular women, children and persons with disabilities that is recognized by all stakeholders.

Clear enough! The British government under the now defunct Cameron-Osborne administration has been guilty of violating the rights of its own disadvantaged citizens.

Some more elements of the Progressive Manifesto

In the light of the foregoing, I have been writing a bit more of the Part 3 of my next book (with Thomas Fazi), which we are stylising as a ‘Progressive Manifesto’ to guide policy design and policy choices for progressive governments.

It is the final part of the book which, overall, traces the way the Left fell prey to what we call the globalisation myth and started to believe that the state had withered and was powerless in the face of the transnational movements of goods and services and capital flows.

It seeks to address the claims made regularly by social democratic politicians that national economic policy must be acceptable to the global financial markets and compromise the well-being of their citizens as a result.

We hope that the ‘Manifesto’ will empower community groups by demonstrating that the TINA mantra, where these alleged goals of the amorphous global financial markets are prioritised over real goals like full employment, renewable energy and revitalised manufacturing sectors is bereft and a range of policy options, now taboo in this neo-liberal world, are available.

I noted the other day that the topics we will traverse in this Part of the Book will include:

1. Exposition of Modern Monetary Theory (MMT) – of course!

2. The use of regulation versus the price system to engender resource allocation changes – for example, Carbon Taxes (price system) against bans on polluting activities (closure of coal mining etc).

3. Employment guarantees versus income guarantees.

4. The entrepreurial state – the role of government in the innovation process. The concept of brainbelts replacing rust belts and the revitalisation of manufacturing (away from cheap towards smart).

After further research and discussion we have added the following topics (sub-topics) to this list:

1. Arguments to support the re-nationalision of key industries, taking the example of pre-1980s France as a positive case study.

2. Adding to the Job Guarantee discussion an analysis of how it deals with the rise of robotic manufacturing etc.

4. Reconstructing the concept of efficiency in resource usage! The mainstream neo-liberal version of the concept that economists like to repeat ad nauseum seems to think it is efficient to have 25 per cent unemployment (and 50 or more percent youth unemployment) as long as the fiscal balance is in surplus or below some ad hoc threshold. We will show that concept is bereft and present an alternative which ties in with (1) above – the way nationalised industries can expand efficient use of human resources, a component of which includes happiness and income security.

3. Apropos of (1), and (7) in the previous list, further discussion of the need to nationalise the banking system.

5. A discussion which we are calling the ‘re-writing the international framework’, with proposals for redesigning the international funds system, including the dismantling of the IMF and replacing it with a new body that will help poor nations survive balance of payments problems (for example, when they are dependent on imported food or energy). This section will demonstrate that a progressive manifesto that recognises the power of the state also acknowledges the importance of the international dimension – internationalism versus supranationalism!

More coming in the next few weeks as the manuscript unfolds.

For today, some brief notes on nationalisation – which we consider an essential aspect of the need to return to a national industry strategy as described above by Paul Mason (although whether he would agree with our take on it is another matter).

Given the length of this blog already, the following is just a set of notes with more detail coming in a dedicated blog on the topic.

I have written about privatisation, nationalisation and efficiency before (including):

It provides a strong evidence-base to revitalise the progressive case for nationalisation of key industries, an idea that has been declared taboo by the neo-liberal agenda.

I say taboo but really mean unless it is some bank that needs to be bailed out by governments and the salaries and benefits of its senior management protected. Then it is okay as we saw during the worst days early in the GFC.

But, otherwise, it is taboo. We have to get that straight, don’t we.

The good old “privatise the profits and socialise the losses” – and don’t ask any questions about the latter.

Paul Cohen notes that the usual conception of France among Americans is of a “land of suffocating bureaucracy and high taxes, inefficient nationalized industries and an enormous taxpayer-subsidized public sector … ” and more.

Remember George W. Bush’s famous (albeit rumoured) intonation to the Iraq war liar Tony Blair “The problem with the French is that they don’t have a word for entrepreneur.”

Paul Cohen says that is symptomatic of the US view of the French as being “not entrepreneurial or hardworking enough” etc.

His article presents evidence to refute that construction:

This France is in large part an imaginary place. France today boasts the fifth-largest manufacturing economy in the world; subject to European Union competition and trade rules stricter than American regulations, it is sufficiently attractive to global capital to make it the third leading recipient of foreign direct investment (ahead of Germany and China); its workers are more productive per hour than their American counterparts and less unionized (in 2003, 12.4 percent of eligible workers in the United States were unionized, while only 8.3 percent in France were). hometo the world’s fifth-largest stock exchange, France, with its vaunted engineering schools, has dispatched armies of math whizzes and economists into New York and London investment banks to invent the trading strategies and exotic derivatives that helped get us into the current mess.

But his discussion of the “French model” focuses on the state planning that characterised the post World War II reconstruction of the nation after the devastation of the war.

The centrepiece of that effort was the “wave of nationalizations” spawned by Charles de Gaulle which saw the state take “control of businesses in energy, transportation, and finance.”

The article documents these public takeovers which “transformed the state into a giant economic actor”.

He writes that:

… in 1946, it directly controlled 98 percent of coal production, 95 percent of electricity, 58 percent of the banking sector, 38 percent of automobile production, and 15 percent of total GDP. Beginning with Jean Monnet, the first director of the General Commissariat for Planning, the government managed public enterprises and drafted five-year plans in order to shape long-term economic development.

Recall that it was the vision of Monnet that started the earlier discussion of European integration. His vision was never the neo-liberal nightmare that the monetary union has become.

He wanted a strong state, with sufficient fiscal flexibility to spawn productive enterprise, maintain high levels of employment, growing productivity and strong growth in real wages as a sign that Europe had left behind the horrors inflicted on it by the Germans and the various collaboration regimes.

Modern Europe would be a monstrosity for the likes of Jean Monnet.

At the heart of that vision was the wide scale nationalisation agenda pursued by the French government.

Paul Cohen concludes that:

It was, by any measure, a great success. Nationalized industries and five-year plans may transgress the treasured tenets of neoliberal orthodoxy, but they didn’t stop France from enjoying three decades of sustained economic growth and prosperity. In the period between 1950 and the first oil shock in 1973, recalled in France today as les trente glorieuses (the “thirty glorious years”), its economy grew at the impressive clip of 5 percent a year (while United States growth averaged 3.6 percent), unemployment was virtually unknown (2 percent in France, compared to 4.6 percent in the United States), and French women and men experienced dramatic increases in their standard of living.

That is what the data tells us! But then the neo-liberals will then just claim the data is wrong or the government was lying about the true data.

Paul Cohen says that the “Washington Consensus” (the neo-liberal ideology) has tried very hard to “wipe our national memory clean of the more ecumenical views that prevailed before the 1980s”.

He also notes that while the Right was vehemently opposed in the neo-liberal era to nationalisation and promoted wide-scale privatisation as a path to moral and economic redemption, “the most striking shift of the post–Mitterrand era was the French Left’s rallying to the privatization creed”.

That shift in the Left is the overall topic of our book project.

The way the Left around the world embraced the neo-liberal agenda is the story. And the solution to a more progressive future (and Brexit success) is for the Left to abandon this neo-liberal mindset and recognise that what worked in the Post World War II period will work again if given sufficent resources and planning.

Paul Cohen is correct in concluding that:

The move away from state ownership was not in fact born of a rational economic calculus but rather of specific political choices.

Neo-liberal ideology ruled over facts.

The evidence which I will present in a further blog is that privatisation has largely failed to reduce costs or make service delivery cheaper and of higher quality.

It has certainly redistributed public wealth into a narrow group of private hands.

Paul Cohen says that the nationalised companies in France have performed well considering. They also deliver major advantages to the stae in terms of aid in industrial reorganisation as the need arises.

So public ownership of the French coal industry allowed the company to shift out of coal-fired electricity generation into nuclear power without loss of employment or regional dislocation.

He says that “when the last coal mine in France shuttered its shafts, the company didn’t lay off a single worker” (in 2004).

There were other advantages he lists, which I will leave to you to read about.

Conclusion

Our contention, which I will spell out in more detail is that nationalisation has to return as a key industry policy plank for any aspiring progressive political party.

In Britain, the Labour Party can start with proposing to re-nationalise the railways and take it from there.

Your comments today are laudible. But maybe premature. It remains to be seen what happens to the Labour Party as a result of the current leadership challenge.

As you correctly say it will require the deselection of over half the incumbent Labour MPs, and then I don’t know what happens going forward. Deselected MPs remain MPs until the next general election, and it is unlikely that May will call one. So if Corbyn wins (as seems likely) he will be left with fewer MPs than are required to sit on the Front Bench, so it is hard to see how the Labour Party can be any sort of effective opposition. Not sure if there can be an opposition coalition. Remains of the Labour Party plus the SNP? Hmmm.

Meanwhile, Corbyn will need to select a new bunch of hopefuls with a progressive agenda, and they will all have to wait for the 2020 general election before entering parliament if, of course, elected. Again, difficult to see how this New New Labour can win against a by-then undoubtedly reunited Conservative Party who will have had four years to stimulate some economic growth released from Osborne’s ridiculous plans to eliminate the deficit. Hopefully, indeed, without Osborne at all.

This will be a highly anticipated food read,important policy platforms to forge a new alternative.

Yes If Britain can no longer attract foreign capital to purchase
Sterling financial assets then it will have to produce more domestically,as it will be more expensive to import.it will require
Outstanding leadership to facilitate a restructuring of the economy to produce enough food and goods to meet domestic demand.

Britain still has a Conservative government. This government may negotiate an association treaty with the EU that maintains the relations between the UK and the EU substantially as they are today.

Can one of the Brits here tell me what the deselection of the Blairites means. Are they no longer going to be the Labour candidate in the next election? Talking about elections, the UK, like Canada, still has the unfair first-past-the post system of choosing a parliament, which is a godsend to the Conservative Party, which has governed Britain for most of the time after WWII without ever obtaining a majority of the votes. In the last election, David Cameron’s party won a majority of the seats with only 36.9% of the votes.

I was born at the beginning of the Nationalization program after the second world war. My youth and early adult life was characterized by feuds between large groups of workers and management, many of which were linked to proposed or actual (economic?) disruptions affecting large scale enterprises; nationalized industries featured prominently.

It is correct to emphasize the shortcomings of neo-liberal economics but surely not at the expense of overlooking the many ramifications of Nationalization.

We are in uncharted waters here because it has never been done before. But yes, if a sitting Labour MP is deselected he continues to be the MP for his constituency for the remainder of the parliament. At the next election he would not be the Labour candidate for that constituency – a replacement would be. The selection and deselection is done by the constituency party members over which the party leader has no control, so it is perfectly possible that some of the “rebels” would not be deselected.

It is also perfectly possible that a deselected MP could stand for another party – or as an independent – and would be in with a very good chance if liked locally.

Uncharted waters indeed, and the National Executive had to rule on whether Corbyn could be on the ballot paper for the party leadership election without the requisite – or any – nominees. Again, never been done before. The NEC’s decision is being challeneged in the courts.

I voted for retaining the FPTP process because I was not convinced PR is a good alternative and seemed complicated. But it was a close call for me.

BTW I crunched the referendum results and found that if the answer was worked out according areas (like FPTP) rather than the total votes cast, there would have been a much larger victory for Leave.

The nationalised industries (and I worked in one for a good many years) were on the whole a byword for inefficiency. Mind you they weren’t alone in that respect: British Leyland probably took the wooden spoon. Large swathes of British industry were rife with union restrictive practices buttressed by the closed shop, “full employment” (so called) was in actuality under-employment.

There are any number of plausible explanations which can be advanced for that sorry state of affairs (“lousy management”, under-investment, under-selling of British goods, etc, etc) most of which are aimed at deflecting any share of blame from organised labour and pointing the finger elsewhere. You can debate ’til the cows come home but I’ll tell you this: if nationalisation were to return in the form in which it existed before in Britain we should be in an even bigger mess than the one already being predicted.

Don’t get me wrong: I can hardly wait to see the end of neoliberalism. But something better has to replace it not something worse.

Nice one, Bill. Surely Paul Cohen means les vingt glorieuses, as the period from 1950 to 1973 is only 23 years. Nigel Hargreaves’ points seem to me to be well taken. Theresa May has taken on some of the positions of the Blairite neoliberals without mentioning the elephant in the room. Her answer to the question, How are you going to pay for it, will tell us. But no one has yet asked. So, unless Corbyn and McDonnell begin to move their narrative toward some kind of Post-Keynesian narrative, hopefully MMT, May will have stolen their thunder and they will not win the next election. Sticking with their current narrative, neoliberal lite, could well consign them to oblivion. The Blairites and the Mayites could band together in a loose coalition. But, in the case of deselection, the ousted MPs will not be able to run in the next election as Labour candidates. So, if Corbyn, should he win the leadership election, is able to find credible alternative candidates, Labour has a chance to win the next election. But in the absence of a strong economically realistic oppositional narrative, which they could point out is neither right nor left, what would sufficiently differentiate his group from the Blairites + Mayites in the minds of the public? While still neoliberal in substance, they will appear to have changed their position(s) in order to accommodate the public mood.

The next book can’t come too soon! The progressives have been running in circles, lost in the woods, for the past few decades after receiving faulty compasses as gifts from the neo liberals and neo conservatives.

“The taxpayer’s dollar” mantra rules government bureaucracies, and P3’s, to our detriment; the level of micromanaging in pursuit of minor “efficiency gains” now involved in the provision of government services, is making fools of university educated managers who now run remarkably inefficient operations from a tangible results/dollar perspective. This fans the flames for the small government crowd, while the resultant waste of potential costs us all big time.

Putting the development and ownership of the high tech capital equipment in public hands would be a way to address additional problem #2, and many of the ills we suffer from today.

Nigel, the PR “ballot” was deliberately designed in order to be difficult to interpret. The next one, should there be one, would likely lack this deficit. If the two main parties split into, say, three parties plus the others, then PR becomes the only reasonable election framework. FPTP is already a dinosaur. Your number crunching results indicate to me that the current manner of aggregating votes is an anachronism and should be changed.

I am not a national public broadcaster which by legislation have to present all sides of a debate but rarely do! My blog is my view which by definition is unbalanced.

Further, you raise the typical old argument about the “inefficiency” of the British nationalised industries, which in the context of your statement is basically akin to the standard mainstream economics notion of the concept.

Do you include in your assessment of “efficiency” the benefits that workers had in terms of stable jobs, stable incomes, the facts their communities were gaining in material prosperity after being damaged in WW2, that income and wealth inequality was declining, that workers had some control over their workplaces, the fact that this industrial strategy provided for upward social mobility, and, significantly, that the children of the workers in these industries saw their parents go to work every morning and thus grew up with hope of a better future for themselves something a child growing up in a jobless household of the privatisation era misses out on?

I doubt it. These are only a few of the broader factors that a progressive should include when measuring “efficiency”. They are always ignored by the mainstream economist and apparently by you when you make sweeping claims that the nationalised sector in Britain was the “byword for inefficiency”.

Thanks for the answer. The reason why Leave would have obtained a bigger victory under FPTP is probably that Remain had a lot of excess votes in the London area. That’s the problem with the FPTP system: it not only matters how many votes are cast for a party, but also where they are cast, as any member of the SNP or the UKIP will know.

Bill, I think this hilarious. The sequence of events here is that the most reactionary forces in the UK have triumphed – and you are applauding!

The new PM there doesn’t look to me like a nice cuddly progressive hellbent on adopting MMT while reining in the excesses of the City. She most certainly ain’t a nationaliser. In fact like the rest of the Eurosceptic Tories her beef with the EU was that she wants the UK to be run by the “right people” – ie become a subsidiary of the City (with perhaps Wall St as a minority shareholder). Those Frenchies, with their tiresome fondness for regulating finance, their push for ending transnational tax avoidance, their socialist wish for co-ordinated industry policy and their meddlesome insistence on les droits de l’homme, were preventing that. Their beef with the EU was never that it was neoliberal but that it was NOT.

Whatever you think of Brexit in the abstract, you can’t seriously think the circumstances, manner and immediate consequences of it represent some sort of progressive development.

This is the plan lads. We’ve got three tunnels underway – Thom, Dick and Harry. We’ll keep Gerry guessing by tying up the EU in meaningless negotiations for several months. In the mean time we’ll be carrying out the real negotiations with our allies. We’ve started digging allotments to fool Gerry, and it gives us an easy way to dispose of the cr*p.

We’ve all already got fake EU passports so that’s not going to be a problem, and Gisela Stewart MP speaks fluent German.

Obviously, this is no trivial issue for countries like Australia and Canada (as a Canadian I always relish your occasional posts on Australian fiscal federalism, on Australia’s Commonwealth Grants and so on). But it will also be an important issue in the U.S. and Germany and Britain, which are all federal states too (obviously! :-)). And one may very well see a reorganization of the EU into a couple of new federal zones, perhaps with strengthened equalization and centralized infrastructure investment.

My point is that many of the post-war “entrepreneurial state” approaches were facilitated in countries like mine, with its linguistic tensions and its fissiparous tendencies at the provincial level, by the experience of the two World Wars (which forced provincial acquiesence to national industrial policies). SO what kind of fiscal / nationalization policies might be considered as suitable steps forward? Some steps are obvious, such as the job guarantee, but would it be too much to hope, as well, that your suggestion of a move towards brainbelts, and towards smart manufacturing, could offer the regional flexibility that the old Fordist/Keynesian manufacturing approaches did not allow?

You join a long list of my blog readers who have pointed out to me that it is the Conservatives that are in power and they are more neo-liberal and reactionary in mindset than those klutzes in Brussels.

Thanks very much for bringing me up to date on British political matters. It is refreshing to know all that.

But sarcasm aside, you miss my point altogether. Political struggles over ideology and paradigm shifts don’t occur after one vote. They sometimes take decades. The neo-liberals didn’t just take over in a blink of the eye – they were mounting their struggle for years and massed huge funds to pursue their agenda.

British labour first of all has to expel its Blairite rump and then recast its own outlook. Then it has to re-engage with the British people – millions of whom have signalled they want to reject the so-called ‘expert’ advice not to rebel. Whether they know what they are rebelling against is another matter – it is a rebellion nonetheless.

And that creates the space for leadership. It might come from the reactionary forces – as we are observing. But it also gives an opportunity for progressive forces to regain the stage and push Britain in an entirely different direction.

My role as an academic and researcher and thinker is to outline agendas that the politicians and the grass roots movements might adopt. Much of what people like me do is for posterity – that is, for the future rather than now!

Meanwhile, thanks for letting me know that Theresa May is not likely to be an adherent of MMT – I would never have guessed that!

“Whatever you think of Brexit in the abstract, you can’t seriously think the circumstances, manner and immediate consequences of it represent some sort of progressive development.”

It’s a very progressive development because it gets rid of the EU albatross around the UK’s neck. That now opens up political possibilities that were not there before.

Unfortunately the Left, in their infinite wisdom, have done what they usually do – collapsed into a fog of cognitive dissonance.

From now on the script usually goes as follows. The Tories will leave the EU, and Labour – because it knows how to win things – will support the losing side in the referendum. I’ve already seen influential people calling for Labour to represent the ‘48%’ quite ardently without for a moment considering how ridiculous a position that is for a party that needs a majority (particularly when you look at the electoral map projections which would give ‘leave’ a 192 seat majority in parliament).

They will then lose to the Tories, and being Labour they will double down on what they believe even more without actually asking real people what the issues are, then they’ll probably lose again before finally somebody comes along and changes the direction.

The problem on the Left is that they are attached to religious beliefs far more than the more pragmatic right and they cling to them long past their sell-by-date. So at the moment we have internationalist basic income people in charge – essentially the UK Green party – which is a non-starter as a policy base, but the alternative is market segmenting, poll watchers who try and PR their way into power by trying to pretend to be the type of Tory they think people want.

I’m really not sure where the ‘nation-first’ Labour person is going to come from who is just going to ensure everybody has a job to go to, a house to live in and a pension to look forward to. Because fundamentally that’s what people are after.

Well, Neil as someone who you no doubt would dub a Blairite (it is as widely used a smear term by the Labour left as the Labour right used to use “Trotskyite”, and with even less meaning) then I can only quote you the Spanish proverb – “be careful what you wish for as you may get it”.

Because my prediction is that Brexit will lead to a very long Tory rule of England (the Scots and northern Irish will be crazy if they don’t leave England to stew in its own juice). And not merely Tory but the worst of the Tories. It’s the political economy of Brexit even more than the pure economics that make it a catastrophe.

“Because my prediction is that Brexit will lead to a very long Tory rule of England ”

Yes. Because UK Labour are basically useless and have no vision. A result of 20 years of Blair obsession with PR and spin over substance.

The Blairites cannot win a general election, and haven’t for over a decade now.

The Blairites complain like mad about the direction the party is taking but actually have no new approach to winning at all. They carry on with the same ‘Tory-lite’ policies and poll-chasing behaviours they have for the last generation or more. They simply cannot accept that approach is defunct and was a product of its time. The approach that is put forward by Corbyn is genuinely a different kind of politics – the end of top down paternalism.

Fundamentally nobody wants a warmed over Labour Hamburger when there is real Tory Meat on offer. Time for the vegetarian option.

All over Europe, people who should be voting for a leftist party because of their socio-economic profile are in fact voting for so-called extreme-right parties. Most of the voters for the German AfD and most of those who voted for Norbert Hofer in the last presidential election are in the lowest half of the income pyramid. Those who vote for Trump are also more likely to be proletarians than highly paid professionals. If the left wants to get these voters back, it will have to throw overboard not only its neoliberalism but also its globalism and eager support for mass immigration. This won’t happen soon because to today’s leftists, political correctness is more important than social-democracy. Among many leftists, there is contempt for working stiffs precisely because they aren’t politically correct enough and therefore seen as ignorant and bigoted.

Neil, I have been told by someone who has a contact at the heart of the Labour Party that Corbyn has said that he isn’t interested in winning an election but rather in building a movement. Which to my mind makes him sound like Bernie Sanders. But he isn’t in the same position as Sanders. This is a ridiulous position to take in the present circumstances. I have also been told that Corbyn has been generally going around talking to the converted, not trying to bring people not on board into the fold. This is a self-defeating strategy, if you can call it that. I find Corbyn problematic, but the neoliberal Labourites unacceptable. They should get out of the party and form their own. Should Labour split, and it might, this would fit your electoral timeline.

Neil, I should have added that there are many things about Corbyn I like. I only mentioned those I didn’t. He has been under seige by these Labour neoliberals since the day he was elected. Every one of them should be deselected. Unfortunately, they stay as MPs. But perhaps, in the next election, some more progressive Labour supporters will come forward. And in the meantime, maybe the members will move the party in a more progressive direction and dump Blairism. One can hope.

It might take some time, but the game is up for the Blairite neocons. Their coup has failed. The ultimate reason being that Corbyn and the left enjoy overwhelming support from the Labour Party’s members, while the Blairites do not. Or to be more precise, the Blairites are loathed by most of the membership.

There will be a fragmentation along 3 axis eventually, with their distinct political structures… The left/far-left, the ‘centrists’ (the decaying status quo power structure which unable to hold up their groudn against pressures), currently neolibs (and neocons), the right/far-right.

Traditional parties of the status quo representing a charade will converge into one, this would be Blairites and ‘centrist’ Tories in case of the UK, probably all converging towards the previously known status-quo ‘conservative’ party. The left will co-opt (recapture?) Labour and form an alliance of whatever remaining leftist forces, and the ‘nationalist’ parties of the right will absorbe part of the previously ‘conservatives’ as well as previously traditional ‘left’ supporters in certain cohorts. Like a ring, far-left and far-right will superpose each other on certain positions and be tangential. Just like fascists parties were back in the day. The neolib shills will lose all their political power thanks to their own wrong-doings (just like the liberals of the 30’s did) and shortsightedness.

This is happening all over the West (in USA it’s more difficult due to the nature of their political system, but it will get there eventually or end up as a failed states like many centra and south american regimes with a seriously divided and degraded social fabric), is not only in the UK, it will take a couple of electoral cycles but is happening.And is just the prelude, like the 30’s in Europe, of what is probably to come. History doesn’t repeat itself, but it rhymes. What is hard to know is how exactly will the situation evolve from there, as the industrial civilisation is on a slow motion crash course this all just may accelerate it or be a catalyst to radically change unsustainable social and economic systems we currently have.

i chose my words badly. “This blog” is of course yours, so I shouldn’t have used that phrase – since I don’t wish to decry the standpoint that you consistently and with great eloquence propound. One doesn’t need to agree with every opinion you advance in order to appreciate and draw a good deal of instruction and stimulation from your blog. That is what I take to be its intention.

But, surely, you don’t expect that all comments will express complete agreement?

Your rebuttal of my comment amounts to a recapitulation of the oft-repeated case for a job guarantee. I base my scepticism (in regard to Britain anyway) upon the experience of having lived through what constitutes the nearest equivalent of a job guarantee that has actually been tried in UK, though it was not called by that name. With the bitter experience of the ‘thirties uppermost in everyone’s mind there was bi-partisan agreement to Keynesian policies of full employment and fiscal deficits. Everyone who wanted a job could get one, with the admirable social consequences you describe.

Unfortunately there was also a downside which you refuse to even consider as a possibility (presumably because you might then be forced to temper somewhat your unconditional advocacy):- British industry was out-performed by all its principal competitors both on cost and (all too often) quality and reliability. Just take the indigenous motor industry as one classic case; it disappeared (oh, except Morgan) or was bought-out by foreign owners. The graveyard that is now Longbridge is a monument to that era of gross over-manning, constant wildcat strikes called at the slightest pretext (or none) by all-powerful – mainly communist party-member – shop-stewards seeing themselves as the front-line of the workers’ revolution, inspired engineering design marred by all-too-faulty manufacturing technology, and all the rest of the depressing catalogue of industrial decline.

The cost-disadvantage could of course have been addressed by devaluations (how many would have been needed I wonder, and what about the penalties of repeated devaluations…?). The “inefficiencies” (with due apologies for using what seems to be a taboo word) could not. That could only have been done – whilst at the same time keeping in place the utopia you see it as having been (though I assure you it didn’t feel like that at the time, even to the average worker so long as he wasn’t a communist – which is why ordinary workers voted in droves for the Conservatives in 1979) – by turning Britain into a siege economy as well as a command economy precisely as advocated by the far left.

I’m not saying there’s no place for nationalised enterprises (though personally I prefer cooperatives, on the model of Mondragon – though that’s a special case probably not duplicable elsewhere). I’m suggesting that everything depends upon how such enterprises are structured and run and that about the worst possible models for that are the British ones in the period we’re talking about.

I wonder what the Commission will do with the money they collect from the fines. If they spend it in Spain and Portugal then the result should be approximately neutral for Spanish growth (not really, because the size of the fine is inversely related to the efforts the Spanish and Governments commit to accelerating “fiscal consolidation”), but the punitive example will be lost. But if they spend it Germany then that would be obscene. What a dumb dilemma. Maybe they should spend the money in Greece; I’d rather see it spent in Greece than in Germany. If they Spanish government had a spine they would say: here, take the money for the fine, I am increasing the deficit. Actually if Spanish politicians had any courage they would just take us out of the Eurozone.

We have this general image of private sector being efficient and public sector being inefficient. It’s odd that inefficiencies of the private sector are never considered. Not only it does all information related work multiple times, like every news media reporting about same event, but it also employs people wherever it can earn more money even if those people do not make more product. To share a pie in new way rather than bake more pie.

Sales, marketing, many others are features of unfettered capitalist system. Understanding inefficiencies of the private sector would give good background to discuss perceived inefficiencies in the pubic sector, for example, the question of do the JG workers do useful work?

Clever policy would discourage unproductive work and employ those human resources to do something productive like public R&D work to solve challenges facing humanity.

I thought Robert was asking for trouble by emphasizing the role of (in)efficiency in determining the success of nationalized industries. Effectiveness is a multi-faceted jewel that glints according to the way it is held up to the ideological light.

It may have been more advisable to discuss productivity, especially on an international scale. The assumption I am making (correct me please if I’m wrong) is that living standards are significantly affected by the success nations enjoy in internalizing that productivity gain.

Those nations that fail to benefit from productivity gains will, over time, endure (relatively)lower standards of living even if they enjoy full employment and the associated social virtues that this implies. The question that naturally arises from this scenario is whether a relatively lower standard of living is noticeable enough to ignite the mass unrest that we used to see in the days of nationalized industries – albeit for historically different reasons.

We can already see unrest on a disturbing scale; Hartlepool recorded the highest EU Leave vote of around 70%. The Tees estuary was not far behind. This is an area of heavy steel and chemicals (or was). Many of the associated semi-skilled jobs have been lost, to be replaced with increasing numbers of service jobs; many of which are now filled by men (eg supermarket jobs).

The principle of MMT and its associated ideology may be clear but it is the practical grind at ground level that determines the mood of a population. It is only a generation ago that the prospect of a company pension was greeted with profound acclaim, yet we have now a situation with Tata Steel where pensions liabilities amount to £15bn and endanger the jobs of 11,000 people.

A reactive criticism is to cite the great bias towards the top wealthy 1% at the expense of the lower order. But this disparity extends beyond the topmost echelon. Even for a steel town like Middlesbrough, of which Captain Cook’s birthplace is now a peripheral part, it is not unusual to see pensioner cyclists sat outside cafes in villages nestling against the Cleveland Hills, pausing to discuss a proposed cruise before dashing back to pick up their grandchildren from school because both parents work full-time as a necessity.

To my memory, the Australia with national institutions and a national bank etc. was better off comparatively than Australia is today. The PMG (Post Master General) handled post and telecommunications. The Commonwealth bank was a national bank. Railways were state owned. The domestic airlines were a managed duopoly with TAA (national) and ANA (commercial). Our international carrier QANTAS was nationally owned and incidentally was the greatest (that is the safest) airline ever created. Efficiency is when passengers always arrive safely IMO. The Commonwealth Serum Laboratory served and protected our health as a national organisation. At the state levels, organisations like the Queensland Irrigation and Water Supply Commission ensured water resources were well harnessed on a dry continent.

Of course, the lie was sold to the Australian public that public enterprise was inefficient. Yet we had full employment (except obviously frictional unemployment) and rapidly rising living standards. The final proof to me that these public enterprises were good businesses was that the neoliberals wanted to plunder them.

I am 100% for re-nationalisation. All natural monopolies should be fully re-nationalised including railways, national air carrier, water supply, electricity distribution and supply, Communications and telecommunications and the Commonwealth bank. Where natural monopoly conditions no longer apply (such conditions can be rescinded by technological progress) then the path is probably to network “prosumers” with a national infrastructure. Electricity from solar power is probably an arena where prosumer cooperatives are possible and these would work well when integrated into a smart grid run by government.

We also need to follow the path being mapped out by Marxians like Professor R.D. Wolff. That is we need to move more to a worker cooperative business model rather than having a solely “capitalist or state” business model for our enterprises. Thus we need to make our economy more diverse, more pluralistic. I believe a good model to move to would be if approximately 1/3 of enterprises were state run, 1/3 were worker cooperative businesses and 1/3 were “traditional” capitalist owned business. Each part of that model is appropriate in different circumstances and it also caters for human diversity (how each person is constituted and likes to work, rest and recreate).

Broadly speaking, national enterprise is appropriate for natural monopolies and economically strategic infrastructure. Trade Cooperatives (e.g. farmer cooperatives) are appropriate for regional natural monopolies. Milk supply was and still really is a good example. Worker cooperatives work well for family size businesses up to about 200 worker businesses. Larger conglomerate worker cooperatives also work well. See Mondragon. Traditional capitalist businesses may well suit entrepreneur types, hyper-competitive people and might also be suitable for capital intensive businesses which do heavy manufacturing and very large projects. Such a mix will also allow interaction with a world which remained more capitalist than such a hybrid economy.

Neoliberalism seeks to implement an economic monoculture. Like all monocultures it is susceptible to contagion and system collapse. Our economy needs to be a more diverse and pluralistic “ecosystem” and it does need to be ecologically sustainable.

I wanted out of the EU. But I am very worried about new developments. The Minister for Brexit, David Davies, wishes to engage with Canada, and the EU regarding the CETA treaty. Out of the frying pan into the fire? What can we do about this?

Wow!this blog has created quite a storm. Well done Bill! As I am on holiday I have come in late. Because I am a MMT student, my points are more queries than criticisms. First, because EU members (Portugal and Spain) had been reduced to the equivalent of states in a federation (like states in Aus or US) due to the common currency, they have no ability to run deficits and must survive on taxation and federal support. Second, we all have examples of waste and mismanagement in state-owned corporations. But this is nothing less than poor management by the state – not because states are poor managers. Telstra is a fine example of a highly technical organisation with highly trained and motivated staff who were satisfied with nothing but the best. We now have a company that I wouldn’t do business with in a fit. Similarly, the Commonwealth Bank is now a dodgy outfil that will take the commissions and see you going broke. Also, privatisation has a long and well documented history of privatised state organisations being run into the ground when the new owners, now in a monopoly position, took the profits and ran.

Thank you so much yet again Bill for your drive, wise words and prolific output. The comment below is indeed very powerful in our current context of the urgent need to transition to a sustainable economy.

Quote:
So public ownership of the French coal industry allowed the company to shift out of coal-fired electricity generation into nuclear power without loss of employment or regional dislocation.
He says that “when the last coal mine in France shuttered its shafts, the company didn’t lay off a single worker” (in 2004).
………..

I agree that mostly nationalised public transport; utilities such as electricity, water, natural gas (which may evolve into the use of hydrogen or synthesised methane); synthetic or biofuels for some transport and industry; telecommunications; council works departments; perhaps 60% ? of banking, finance services, insurance; public housing could be beneficial. These sectors would also draw from the private sector to a considerable extent to perform the construction role, where applicable and to provide the goods and external services similar to how the Snowy Mountains Scheme was undertaken.

Competent and unencumbered management however remain essential and competition between state owned enterprises and with privately owned enterprises should be planned for from the beginning. A balance of power between management and re-invigorated trade and professional unions is beneficial for the welfare and rights of employees, but a return to overly restrictive and inefficient trade practices of 40 years ago must be avoided.

The example of the privatisation of the inefficient Williamstown Naval Dockyard in Melbourne which became AMECON, then Tenix and now BAE Systems was in my opinion a successful example of privatisation as the management team put in place proved to be highly capable. As an aside this enterprise is now on the edge of bankruptcy due to very poor workload planning by the Federal Government which reveals another economic planning issue that must be improved.

We also do not need more large paper shuffling bureaucracies that often serve as mini empires for their management and work force with little customer or client focus.

The bulk of education, health care, aged care, social support, much of the arts and environmental management should probably remain in the public sector but again a moderate level of private ownership can be beneficial to provide greater customer choice and to provide competitive pressure.

I however firmly believe the vast majority of the production of goods and ‘non welfare’ services and construction should remain with the private sector. These industries, which include agriculture, mining/resources, retailing, tourism, hospitality, professional sport and most entertainment have generally operated well in this country with the private sector.

The Japanese approach of the government working closely with the private sector has been a major factor in Japan’s post war economic success. The Japanese Ministry of Economy, Trade and Industry has played a much larger and far more effective role with economic development than nearly any other country. Singapore and South Korea have followed a similar path in many ways.

I strongly believe Australia should adopt a local variant of METI but it must never be allowed to be corrupted by hard line right wing neo-liberals like those that currently control our destructive Productivity Commission.

The development of new industries and areas of business must harness to a much greater extent our higher education institutions and public and privately owned research institutions. Professor Goran Roos has done a lot of good work on this subject especially for the South Australian government. He may be a bit of a harsh judge on Australia’s existing manufacturing industry, for example he has supported Sweden’s decision to move away from car manufacturing which I do not agree with for Australia especially considering the realistic possibility of transitioning to battery electric, fuel cell and alternative fuel vehicle manufacture in Australia. Goran’s recommendations however for building new industries are among the most realistic and best I have found.

Professor Goran Roos’ economic development strategies combined with an Australian METI and a policy of preferential trade rather than 100% free trade is a winning combination. Preferential trade means mostly free trade but moderate tariff walls for vulnerable start-up industries and key existing industries deemed important enough to retain in an extremely competitive world, examples being the steel industry, automotive manufacturing and components, white goods, some food processing, , some consumer goods, some clothing and foot ware and some building products/materials for example.

We must also never forget that a third world economy cannot support a first world education, health care, social support and environmental support sector. The internationally tradable goods and services sector of our economy that underpins our national wealth and sustains the wider economy must at all times be given priority or we risk falling into a downward spiral. The Japanese Government has managed this balance very well perhaps because they never had the luxury of ample mineral and agricultural capacity to fall back on.

The Australian Greens policy platform that addresses the urgent issues of global warming, protection of the environment, animal welfare as well as all social and economic issues provides a solid foundation for a successful progressive future for Australia.

Belated thanks for this great blog article Professor Mitchell.
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I started to become more and more EU-sceptic (while remaining culturally very much a European) after seeing what happened to Greece. Nevertheless, despite my misgivings, I allowed myself to be persuaded by “wiser” heads to vote Remain. When the results came in, I was at first shocked, but later secretly pleased as I realised the possibilities.
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I am under no illusions about the Tory government: the next few years is going to be bad, but it’s up to those of us in the progressive, anti-neoliberal movement to hang in there, and work for a more enlightened government. We have far more chance of achieving this than we ever had of “reforming” the EU. The only think that might be done with the EU is to dismantle it and (maybe) start again.
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I’m not a member of the Labour Party, but I like Corbyn and wish him well. However, I’m afraid I don’t trust the Labour Party as a whole.
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I joined the Green Party towards the end of 2014, in order to campaign in the 2015 general election. I did this because at the time, it was the most left-wing of the parties with any hope of winning MPs. I wasn’t so keen on its support of the EU, but that was less of an issue then, and it was sound on things like nationalisation. (Thanks for your support of the public sector in the UK by the way).
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I’m still in the GP, but was dismayed at its uncritical (as far as I could tell) support of the EU in the referendum campaign. Not once have I heard an actual concrete proposal from them about how they might “reform” the EU (not that I actually think it is possible now).
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Well, Jeremy is still hanging on, and will presumably win the leadership election, but his problems will continue, sad to say. I wish him luck. With hindsight, I just wish he’d campaigned openly for Leave (“Lexit”).
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